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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY

USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT

POLICY

Date:

GAIN Report Number:

Approved By:

Prepared By:

Report Highlights:

Higher cotton prices in MY16/17 and continued government’s subsidies are expected to encourage

cotton farmers to moderately expand cotton acreage in MY17/18. Planted area is forecast to increase

3.3 percent. Chinese cotton production is forecast to recover by 2 percent to 5.15 MMT, still the lowest

level in a decade compared to official production statistics. Despite the comparatively small domestic

production, China remains focused on reducing its state cotton reserves. Industry observers expect

China may succeed in lowering reserves to 5 MMT by the end of 2008. Cotton use is expected to

recover to 7.9 MMT in MY16/17, and forecast to rise to 8 MMT in MY17/18. The narrowing gap

between domestic and global cotton prices contributed to this recovery and also resulted in lower yarn

imports. MY17/18 ending stocks are forecast to fall to 8.9 MMT with stocks to use ratio down to 111

Jennifer Clever

Lisa Anderson

China Makes a Dent on its Cotton Reserves while Imports Drop

to Second Lowest level in 13 years

Cotton and Products Annual

China - Peoples Republic of

CH17014

4/1/2017

Required Report - public distribution

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percent. Anticipating Chinese sales of cotton reserves and restrictions on additional import quotas,

China’s cotton imports are expected to drop further to 0.98 MMT in MY16/17, the second lowest level

in 13 years. Still, the Chinese textile industry continues to use higher-grade foreign cotton to stay

competitive in export markets. MY17/18 total cotton imports are forecast at 1 MMT.

Executive Summary:

China’s MY17/18 cotton production is forecast to recover moderately to 5.15 million tons (MMT) from

the estimated 5.05 MMT in MY16/17, and the 4.8 MMT in MY15/16. Post forecast MY17/18 cotton

planting area to recover to 3.1 million hectares (MHa) from the 3 MHa in MY16/17. Lower earnings

resulting from China’s government cotton policies implemented since MY14/15 contributed to the

decade low cotton production in MY15/16. However, the “Target Price-based Subsidy Policy” for

Xinjiang has proven to ensure basic returns for Xinjiang cotton farmers during the 3–year trial of the

policy implementation. Hence, this policy will continue in MY17/18 through MY19/20 with a fixed

target price unchanged from the MY16/17 level of RMB18,600/ton ($2,800/ton). The stable target price

and the increase in cotton prices in MY16/17 is expected to drive modest growth in the Xinjiang cotton

area in MY17/18. Similarly, the reduction of government support to corn production in 2016 is

expected to encourage farmers to add cotton acreage moderately in other cotton-producing provinces.

The forecast steady economic growth, lower yarn imports, and the recovery of cotton fiber share (vs

polyester) are expected to stimulate Chinese cotton consumption. Thus, cotton consumption is

estimated at 7.9 MMT in MY16/17, and forecast to grow to 8 MMT in MY17/18. Despite the small

domestic production and the recovery in cotton use, China’s priority remains to ease the burden of its

large cotton stocks following years of state cotton purchases. At the beginning of MY16/17, China’s

cotton stocks were estimated high at 12.67 MMT, and expected to fall to 8.9 MMT by the end of

MY17/18. Stock-to-use ratio is down to 111 percent. The government’s ability to control domestic

supplies through sales of state reserves and limits to additional tariff rate quotas (TRQ) will continue to

reduce cotton imports to an estimated 0.98 MMT in MY16/17 and forecast 1 MMT in MY17/18. Given

the expected stagnant cotton imports and increasing competition from other cotton suppliers such as

Australia, Chinese imports of U.S. cotton are expected to be lower at 250,000 tons per year in MY16/17

and MY17/18. That said, seeking to stay competitive in export markets, the Chinese textile industry is

likely to continue sourcing higher- grade cotton from the United States.

MY17/18 Cotton Production Forecast to Recover to 5.15 MMT

MY17/18 domestic cotton production is forecast to recover to 5.15 MMT, up 2 percent from an

estimated 5.05 MMT in MY16/17. The forecast moderate growth is based on a 3.3 percent expansion in

planted area to 3.1 MHa. Increase in cotton prices and profits during MY16/17 contributed to the area

expansion.

Introduced in MY14/15, the government’s “Target Price-based Subsidy Policy” for cotton production

(covering Xinjiang only, see more in Policy section) has guaranteed basic returns for Xinjiang cotton

farmers while effectively reducing earnings in other cotton-producing provinces. The policy switch in

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MY14/15 led to a decade-low cotton production in MY15/16 (see GAIN report CH16024). Recently,

the Chinese government decided to continue the high target price support policy for Xinjiang in

MY17/18 and continue it through MY19/20. For the next three years, the target price will remain

unchanged from MY16/17 and fixed at RMB18,600 ($2,906)/ton. In addition, higher cotton prices and

profits in MY16/17 further enhanced Xinjiang farmer’s confidence in cotton, as well as some farmers in

other cotton-producing regions. Furthermore, as the government reduced support for corn production in

2016, farmers in some provinces may opt to plant cotton instead of corn.

Estimates for China’s cotton area and production continue to differ among sources. Below is a table of

estimates by various sources for MY15/16 and MY16/17 area and production. China’s National

Statistics Bureau (NSB) estimates MY16/17 total cotton production at 5.34 MMT. This is based on a

planted area of 3.38 MHa with yields averaging about 1,582 Kg/Ha. NSB’s data shows MY16/17

Xinjiang’s cotton production at 3.59 MMT (about 67.2 percent of total production) with an acreage of

1.81 MHa (or 53.6 percent of total acreage). This production figure is far below the official classified

volume of 3.93 MMT for Xinjiang done by the China Fiber Inspection Bureau (CFIB) as of the end of

February, 2017. However, the NSB MY16/17 production estimate of 1.75 MMT for all other provinces

is also significantly higher than the industry estimated production of about 1 MMT. In its 2016 Cotton

Production Announcement, NSB provided further details on its statistics methodology, described to

combine remote sensing and sample surveys to estimate the planted area and yield in Xinjiang. For

other major cotton-producing provinces including Hebei, Shandong, Henan, Anhui, Jiangsu, Hubei and

Hunan, NSB conducted sample surveys to estimate the planted area and yield. In other small cotton-

producing provinces, NSB used “comprehensive statistics” to obtain area and yield information.

Cotton Production Estimate/Forecast by Various Sources (MMT; MHa)

CCA NCMMN CNCE MOA NSB Post

MY15/16

Acreage/Production

3.21/4.82 3.41/5.22 NA/4.75 NA/4.93 3.8/5.6 3.05/4.8

MY16/17 Acreage/Production 2.75/4.94 2.91/5.12 2.62/4.76 3.1/4.72 3.38/5.34 3.0/5.05

MY17/18

intended planting

area/production

2.83/NA 2.99/5.04 2.73/4.57 NA NA 3.1/5.15

MY17/18 area change +3.2% +2.2% +4% NA NA +3.3% CCA- China Cotton Association, NCMMN- National Cotton Market Monitoring Network, CNCE- China National Cotton

Exchange; MOA-China’s Ministry of Agriculture

Many industry sources believe the CFIB classified volume may provide the real production picture for

Xinjiang. It is likely that the NSB’s 3.59 MMT production data for Xinjiang is based on official

statistical reports. These reports may reflect more of the local government’s intended plan to cut cotton

acreage at the beginning of 2016 in response to the central government’s call to adjust the crop mix in

light of the high state cotton reserves. In addition, cotton planting in unreported lands continues to be

one of the safest and most reliable sources of income for some farmers when the government target price

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is high. Hence, the government’s MY16/17 reduction target to reduce Xinjiang cotton acreage was not

fully achieved.

MY16/17 cotton production for other provinces remains difficult to measure as the central government’s

production-based subsidy policy can lead to over reporting by patrons at different levels. Based on all

these factors, Post estimates MY16/17 production is 5.05 MMT based on a planted area of 3 MHa.

Planted Area

Post forecasts MY17/18 total planted area will recover by 3.3 percent to 3.1MHa from the estimated 3

MHa in the previous year. Specifically, the Xinjiang planted area is forecast up by 3 percent to 2.03

MHa, and the rest to rise by 4 percent to 1.07 MHa. Based on the implementation of the “Target Price-

based Subsidy”, cotton planted in uncertified areas will remain ineligible to receive support payments in

Xinjiang during MY17/18. However, as mentioned above, the positive profits as a result of rise in

cotton prices in MY16/17 will encourage farmers to expand cotton area in Xinjiang. Similarly, the

planted area for all other provinces is also forecast to increase moderately in MY17/18. Again, the

moderate expansion outside of Xinjiang provinces is in response to higher cotton prices, earnings, and

less government support to corn in MY16/17.

Chart 1 - Average Net Earnings* from Cotton Planting in Recent Years

(2011-2015; RMB/Ha)

Source: National Development and Reform Commission (NDRC) *Excludes labor income

According to industry sources, a recovery in seed and processed cotton prices from the low levels in

MY15/16 significantly improved cotton planting earnings in MY16/17. Cotton seed prices increased an

average of 27.7 percent and processed cotton increased by an average 20.7 percent compared to the

previous year.

In Xinjiang, along with the increase in cotton prices, good yields also contributed to higher returns and

profits despite a moderate increase in production costs (labor and other inputs). Chinese industry sources

estimate that cotton profits in Xinjiang stand at RMB769/Mu (or $1,737/Ha) for hand-picked crop and

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RMB860/Mu (or $1,943/Ha) for mechanized harvest crop if the subsidy to farmers is included. These

returns are significantly higher from the MY15/16. It is worth noting that the government subsidy will

only cover the NSB certified production (3.59 MMT compared to the CFIB classified volume of 3.94

MMT). Nevertheless, industry observers estimate the profits for this “additional cotton production” (not

certified by NSB and ineligible to the government subsidy) could be higher at about $1,350/Ha in

MY16/17. Despite the local government’s call for cutting cotton acreage in recent years, cotton planting

in marginal land continues as farmers find cotton profits remain generally higher and are more stable

compared to other competing crops. Despite the recovery in seed and cotton prices, there are several

factors likely to discourage Xinjiang farmers from significantly increasing the province’s cotton acreage

in MY17/18. Some of these factors include the fluctuation of domestic cotton prices in recent years; the

fixed government’s target price; the government’s call for restructuring the crop mix; and limited water

resources.

In provinces outside of Xinjiang, cotton earnings are also estimated to have recovered from the previous

year’s negative level. The MY16/17 fixed direct subsidy of RMB2,000 ($300)/ton will be paid to cotton

farmers and is expected to continue at the same level in MY17/18. Another factor encouraging farmers

to add to the cotton area is the lower corn earnings resulting from the government’s reduction to corn

support in 2016. However, cotton planting in these provinces continues to be challenged by increase in

labor costs (almost 100 percent harvest is hand picked), low yields, and cotton price fluctuation.

Additionally, in those provinces farmers have more crop choices and casual work is available in cities

within the Yangtze River and the Yellow River regions. Thus, for these regions, Post favors only a

moderate recovery in the planting area during MY17/18.

The China Cotton Association (CCA)'s February survey results show MY17/18 cotton planting

intentions are up by 2.85 percent to 2.83 MHa. Specifically, plantings intentions are expected to rise

from the previous year by 1.74 percent in Xinjiang, 5.5 percent in the Yellow River region, and 5.1

percent in the Yangtze River region.

A survey by the China National Cotton Exchange (CNCE) also supports a rise of 4 percent in planting

intentions for MY17/18 to 2.73 MHa, compared to 2.62 MHa in MY16/17. Based on CNCE’s data, the

MY17/18 Xinjiang planting intentions are up 3 percent to 2.17 MHa. For MY16/17, the CNCE estimates

a low acreage for all other provinces. Hence, CNCE’s forecast for MY17/18 acreage continues to be

tempered at 523,000 Ha despite a forecast 8 percent increase in planting intentions for MY17/18.

An earlier survey conducted in late 2016 by the National Cotton Market Monitoring Network (an

information source of the China State Cotton Reserve Corporation) indicated that the MY17/18 cotton

planting intentions are up 2.2 percent and could reach 2.99 MHa. Specifically, planting intentions for the

Yangtze River region are up 8.1 percent, 4.9 percent in Xinjiang while the Yellow River region also

shows very slight growth. While the increase rates in areas outside of Xinjiang may seem high, the

acreage share of these regions remains small compared to the nation’s total cotton acreage.

Chart 2 - China Cotton Planted Area and Production

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(MY12/13 to MY17/18)

Source: NSB; MY17/18 forecast by FAS/Beijing

Local government organizations’ survey results for MY17/18 cotton planting intentions vary but

generally support a moderate recovery. For instance, the Xinjiang Provincial Government’s survey (not

covering the Xinjiang Production and Construction Corp-PCC) showed a 3 percent increase in MY17/18

cotton planting intentions. A county in Shandong reported an increase in cotton planting intentions

(based on a 18 farmers’ survey) mainly due to a shortage of casual job opportunities in the region.

However, another survey by the government of Bingzhou City, in Shandong Province, reported a 4.8

percent fall in planting intentions (based on 48-households interview) due to low cotton profits per/day

compared to other crops or casual city jobs. Likewise, the Hubei Provincial government’s survey results

also showed a decline in cotton planting intention for MY17/18.

Yield

NSB data shows China’s average cotton yield has varied significantly by individual

province/autonomous region. In recent years, yields ranged from about 1,000Kg/Ha in the Yangtze

River region to 2,057Kg/Ha in Xinjiang province. Chart 3 shows average yields for Xinjiang and all

other provinces for the last five years. Overall, Post forecasts MY17/18 cotton yields to be slightly

above average at 1,970Kg/Ha for Xinjiang and 1,075Kg/Ha for all other provinces.

Weather conditions and the use of new technologies, including biotech cotton varieties, continue to be

key factors in yield gains. The use of biotech cotton varieties to reduce pest-related losses will continue

to dominate in the provinces within the Yangtze River and the Yellow River regions. However, weather

uncertainties in these regions, such as flooding or drought, frequently delay harvest, affect fiber quality,

and impact yields.

Chart 3 – NSB Five-Year Average Yields for Xinjiang and All Others

(Kg/Ha; MY12/13 to MY16/17)

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Source: NSB

The weather conditions in Xinjiang continue to be an advantage for cotton farming. The use of biotech

cotton varieties is reportedly increasing too to reduce sprays although pests are less prevalent than in

other provinces. Conventional varieties with specific traits, such as a dwarfed plant height and early

maturity, continue to raise yields. The Xinjiang Production and Construction Corp (PCC) farms, which

are organized on a larger scale than other typical Chinese cotton farms, are able to incorporate particular

agronomic practices to improve yields, such as high density sowing, plastic sheet covering, and drip

irrigation technology.

Mechanized harvest is increasingly popular throughout the Xinjiang Province, in particular in the PCC

farms seeking to reduce the need for labor inputs. Industry sources estimate that in MY16/17, about 90

percent of the PCC cotton area was mechanically harvested compared to 70 percent during the previous

year. For non-PCP farms in Xinjiang, the rate of mechanized harvest remained relatively low in

MY15/16 at 255,000 Ha but still higher than 190,000 Ha in MY13/14. This trend in mechanization is

expected to continue in MY17/18. That said, there have been complaints about yield losses and lower

fiber quality as a result of mechanized harvest. Hence, it will take some time for the Xinjiang cotton

sector to develop more adequate technology, including appropriate cotton varieties and agronomical

practices, for mechanized harvest to fully upgrade the overall productivity of its cotton farming.

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Source: China Ministry of Agriculture 2015, blank map from http://www.d-maps.com/carte.php?num_car=11570&lang=en

Legend:

Dark Blue = 63% or more of total Chinese production (Xinjiang)

Blue = 5 to 10% (Hebei, Hubei, Shandong)

Light Blue = 3 to 5% (Anhui)

Stocks

At the beginning of MY16/17, China was estimated to hold 12.67 MMT of cotton, about 60 percent of

the world cotton stocks. However, Chinese cotton stocks are forecast to fall dramatically to 8.9 MMT

by the end of MY17/18 as a result of increased use of state reserves and relatively low domestic cotton

production. In addition, the forecast low cotton imports as a result of the scheduled stocks sale at

market-oriented prices will also contribute to the stock’s fall in MY17/18. Government cotton support

policies from MY11/12 through MY13/14 led to the purchase of more than 16 MMT of domestic cotton,

and weaker cotton consumption contributed to China’s current high level of cotton stocks.

The 2017 government’s cotton reserve sales began on March 6 and are scheduled to end by late August

2017. Similar to 2016, the basic auction price will be more “market–oriented” based on the average of

the domestic and international spot market cotton price indexes during the previous week. The daily

volume for auction will be about 30,000 tons. As of March 20, 2017, the cumulative cotton purchased

reached 292,000 tons and accounted for 85.4 percent of total offered volume. Over 50 percent of the

buyers are spinning mills while the rest are traders. The daily average purchased price is shown in Chart

4 below:

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Chart 4. Daily Average Purchased Price of 2017 Sales of State Cotton Reserve (RMB/ton)

Source: CCA (Current exchange rate: $1=RMB6.8)

The 2016 state reserves sales resulted in a total of 2.66 MMT cotton sold. Some industry sources

estimate that during the 2017 rotation period, the total volume sold could reach up to 3.7 MMT. It is

important to note that as of March 28, 2017, the current average daily purchase rate of 78.3 percent does

not support this estimated high volume of sales. Nevertheless, industry observers believe that China

could very well succeed in reducing its state cotton reserves to 5 MMT by the end of 2018. This would

be considered a manageable level compared to the 13.9 MMT in MY14/15, when China’s cotton

reserves peaked after three years of state support purchase programs. (See GAIN Report CH15011)

Cotton Trade

Cotton imports expected to recover slightly to 1 MMT in MY17/18

During MY11/12-MY13/14, Chinese cotton imports averaged about 4.3 MMT a year as China’s

government’s cotton support policies enabled state purchases of domestic cotton at high prices and

artificially inflated demand for imports. This import surge ended in MY14/15 when the government

revised its cotton support policy. Cotton imports in MY14/15 returned to pre- MY11/12 levels to 1.8

MMT and continued to slide to 959,000 tons in MY15/16. However, as the gap between Chinese and

international prices narrows and yarn imports lower, cotton imports are expected to grow slightly to

980,000 tons in MY16/17, and to 1 MMT in MY17/18. This recovering trend is also supported by the

Chinese textile industry seeking to source higher-grade cotton from foreign suppliers to stay competitive

in export markets. That said, the government has the ability to temper any significant increase in cotton

imports by limiting the issuance of additional import TRQs outside of those committed under the World

Trade Organization (WTO).

Under its WTO commitments, China is obligated to annually allocate 894,000 tons of cotton TRQ

imports (subject to a one percent import tariff). In previous years, China also issued additional import

quotas outside of it WTO TRQ (see attached table 12 - Tariff Rate Quota) until 2014. However, the

additional TRQ allocation in 2015 and 2016 remained unknown or very limited. Some industry insiders

estimate that about 300,000 tons of cotton imports destined for processing and re-export went through

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the bonded zones in 2015. Industry observers believe that outside imports through bonded zones, the

distribution of additional TRQs appear improbable for 2017.

Cotton imports without a TRQ allocation are subject to a stiff 40 percent import duty, which normally

impedes their price competitiveness. Industry sources report that low global market prices combined

with tight domestic supplies, triggered out-of-quota cotton imports in 2013 (roughly 500,000 tons), and

in the first months of 2014. Based on the formula to calculate the auction price for the state cotton

reserves, there seems to be very little possibility that the international cotton price will be sufficiently

low to offset the high out-of-quota duty. Imports of cotton outside of the WTO TRQ (that is, paying the

full 40 percent out-of-quota duty) appear not to be commercially viable in the near future.

Chart 5 - Cotton Production, Imports, Consumption and Yarn Imports

(MY12/13 to MY17/18; in 1,000 tons)

Source: FAS/Beijing Estimates/Forecast and Global Trade Atlas

Yarn imports are another factor exerting downward pressure on cotton imports in recent years. Unlike

cotton imports, yarn imports do not face quota restrictions. China’s yarn imports remained robust at an

annual average of 2.14 MMT during MY13/14 to MY15/16. The net yarn imports reached 1.8 MMT

per year in MY14/15 to MY15/16 compared to 0.5 MMT per year during MY09/10 to MY10/11. High

yarn imports partly reduced cotton imports in 2015 and 2016. In the first 6 months of MY16/17, yarn

imports declined 7.9 percent (or down 87,200 tons) while import price increased by 3.7 percent,

respectively, from the previous year. The price gap between domestic and imported yarn narrowed and

decreased import profitability.

Chart 6 – Comparison of Monthly Yan Imports and Price in the First 6 Months

(MY15/16 and MY16/17; in tons/left axis and $/ton/right axis)

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Source: Global Trade Atlas

In MY15/16, India, Vietnam and Pakistan remained China’s top three yarn suppliers, absorbing a

combined 73.9 percent share of the Chinese market. Since 2012, China’s spinning sector has continued

restructuring resulting in the closing of many small mills with an estimated removal of 30 million

spindles. Forecast decrease in yarn imports are expected to facilitate cotton imports in 2017.

U.S. cotton continues to compete with other suppliers for China’s limited import quotas

In MY17/18, as China’s total imports are forecast to improve slightly to 1 MMT, Chinese imports of

U.S. cotton are expected to marginally recover to 250,000 tons in MY16/17 after falling to their lowest

level in 14 years at 192,000 tons in MY15/16. Although the quality and reliability of U.S. cotton

appeals to China’s end-users, in MY15/16, Australian cotton became very competitive and topped

China’s market with 268,000 tons. On the other hand, India’s cotton exports to China declined mainly

due to Chinese buyers’ preference for high-grade cotton when import quotas are limited.

Chinese cotton exports are forecast to increase slightly in MY17/18

China’s cotton exports average about 10,000 tons annually, a nominal amount compared to China’s total

cotton use. However, cotton exports in MY15/16 reached 28,000 tons, the highest level in nine years.

Facing massive stocks, China’s cotton exports are likely to continue in 2017 and beyond as the

government chooses to sell its reserve at a more market-oriented prices. For MY16/17, Post estimates

cotton exports to reach 33,000 tons but forecast to stay unchanged in MY17/18. That said, export

growth will depend on whether the government’s new state auction price is competitive enough to

attract sales. Meanwhile, Chinese yarn exports are still not competitive and fell to 331,000 tons in

MY15/16 from 370,000 tons in MY14/15 and 497,000 tons in MY12/13. In MY15/16, Chinese net yarn

imports remained high at 1.74 MMT, down from the 1.9 MMT in MY14/15 but still significantly high

compared to 500,000 tons in MY10/11.

Consumption

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MY17/18 cotton consumption is forecast at 8 MMT, up from an estimated 7.89 MMT in MY16/17. The

modest growth in cotton use is mainly driven by a more market-oriented domestic cotton price, which is

expected to reduce yarn imports and stimulate cotton fiber use in yarn production. Anticipated growth

in domestic demand for textiles and apparel products is also expected to moderately boost China’s

cotton use. Chinese exports of textile and apparel products are expected to remain stable. However,

international demand could be affected by changing import policies in major markets including the EU

and the United States. Moreover, Chinese exports continue to face strong competition from other South

East Asian suppliers with lower labor costs.

Forecast lower yarn imports encourage China’s cotton use

As mentioned above, the profitability of yarn imports is falling. Hence, imports of yarn are expected to

fall in 2017 and 2018. In previous years, increased yarn imports significantly reduced China’s cotton

use for spinning. The average net yarn imports hit 1.8 MMT per year in MY14/15 to MY15/16 from the

0.5 MMT per year in MY09/10 to MY10/11. Industry sources indicate that the current gap between the

domestic and international cotton prices (about RMB1,000 or $150/ton compared to the RMB2,000 or

$300/ton in October 2016) will support more domestic spinning. The estimated price advantage for

imported yarn over domestic yarn in 2014 (about RMB580 ($94)/ton and 2015 (RMB320 ($52)/ton)

decreased significantly for most of 2016 and the first months of 2017. This considerably reduced profits

for yarn importers. As a result, during the first 6 months of MY16/17, yarn imports declined 7.9 percent

from the previous year (down 87,200 tons) while the import price increased by 3.7 percent.

Cotton share is expected to recover slightly in yarn production

In 2017, cotton fiber will moderately regain its share in Chinese yarn production as the cotton price

becomes more market-oriented and prices for polyester fiber increase. Given the high cotton price since

2013, cotton share in yarn production continued declining to the current 36 percent compared to the 64

percent five years ago. In recent years, technological advancement has enhanced the quality of man-

made fiber and increased its use in the manufacturing of textiles and apparel.

Chart 7 - China Cotton Price B-Index vs Polyester Fiber-Index

(2014-2016; Monthly; RMB/ton)

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Source: cncotto.com

According to NSB, in 2016, China’s total yarn production increased 5.5 percent from 35.38 MMT in

2015 to 37.33 MMT. Also in 2016, total chemical fiber production grew 2.4 percent from the previous

year to 49.44 MMT.

China's Textile Sector Production/Investment Trends

Year/Item

2012 2013 2014 2015 2016 2016/2015

Change %

Yarn Production (million tons) 29.84 32.0 33.79 35.38 37.33 +5.5

Fabrics Production (Million Meters) 841 883 894 893 907 +1.6

Chemical Fiber Production (million

tons) 38 41.2 43.9 48.3 49.44 +2.4

Fixed Asset Investment in Textile

Sector (RMB billion) 397.1 472.6 NA

NA 664.3*

+7.8*

Source: NSB China Economic and Social Development Report;*Based on China Cotton Textile Industry Association

Export of textiles and apparel expected to stabilize

NSB data shows that in 2016, total Chinese textile and apparel exports lowered 8 percent in value from

$283.9 billion in 2015, to $261.1 billion. (Note: Chinese total exports are down only 1.5 percent in

RMB value as the Chinese currency depreciated by 7.1 percent in 2016). Preliminary customs statistics

for the first two months of 2017 indicate that total textile and apparel exports continued to slide by 9.1

percent compared to the same period last year. China’s industry leaders consider that the smaller export

value could be mainly impacted by a fall in contracts during the Chinese Spring Festival vacation during

the second half of January. Generally, a weak demand recovery in major importing countries together

with increased production costs further reduced the competitiveness of Chinese products in the global

market. Nonetheless, China’s industry experts remain optimistic about the prospects for stable exports

in 2017 supported by a more competitive domestic cotton price.

Chart 8 – China’s Textile and Apparel Exports

(2013-2016; Value in $100 million)

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Source: NSB Yearly Social and Economic Development Report

Growth in domestic demand for textile and apparel drives cotton use

China’s overall increase in demand for textile and apparel products is fueled by higher disposable

income, rising living standards, population growth and urbanization. China’s GDP growth is expected

to stay stable ranging from 6.5 to 7 percent in 2017 from the 6.7 percent growth in 2016. According to

the NSB, from 2011 to 2015, China’s average annual net population growth was 6.8 million. The

government’s amendment to the “one child policy” in 2016 pushed net population growth to 8.09

million in 2016 and this trend is expected to continue in 2017 and beyond. Additionally, rapid

urbanization continues with an annual average growth in urban population of 20.1 million from 2011 to

2015, with 21.82 million new urban residents added in 2016. NSB data also highlights that sales of new

homes/apartments in 2016 jumped by 22.5 percent from last year encouraging demand for more home

textile products.

NSB data shows the 2016 domestic sales value of apparels and other textile products increased 7

percent from the previous year. The 2015 Chinese per capita expenditures on clothing increased for

both urban and rural residents, with urban residents’ expenditures reaching RMB 1,701($256) still

outspending rural counterparts at RMB550 ($83). The difference in regional spending is also large

ranging from RMB2,425 ($365) in Beijing to RMB968 ($146) for Gansu in North China, and

RMB1,103 ($166) for Guangdong to RMB503($76) for Guangxi in South China. As rural incomes

grow, the market potential for China’s 603.5 million rural residents to increase textile related purchases

is expected to rise. This will undoubtedly support continued demand for domestic cotton products. The

textile sector’s output value in the first 2 months of 2017 increased 4.1 percent compared to 5.5 percent

growth during the same period in 2016.

China’s Textile Sector Continues to Restructure

The textile industry in China employs over 23 million people and is considered one of China’s

economic pillars. According to industry sources, total fixed asset investment in the textile industry

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sustained high growth in 2016, up 7.8 percent from 2015. Investment in cotton spinning increased 19

percent compared to 2015 mostly in Xinjiang and inland provinces. Particularly in Xinjiang, the fixed

asset investment in the textile sector grew by 51 percent to RMB48 billion ($7.23 billion) in 2016. This

influx in investment is consistent with the MY14/15 China’s cotton policy focus shift towards that

region. The Xinjiang government estimates new investment in textile and apparel sector is likely to

reach RMB60 billion ($9 billion) in 2017.

However, total sales profit for the textile sector increased only 4.4 percent in 2016, compared to 5.4

percent growth in 2015, and 6.1 percent growth in 2014. Despite the financial influx, the textile

industry faces significant challenges, including higher cotton prices compared to other competitors, and

rising production costs for key inputs such as electricity and labor. Despite the recent government

policy changes, industry statistics show that China’s spinning sector continues to currently pay

RMB1,000 ($151)/ton more for cotton. China’s Textile Industry Association data shows that China’s

electricity cost for the industry is almost double that of Vietnam and the United States. Similarly, labor

costs continue to grow, up over 10 percent in 2016 in major textile-producing provinces including

Jiangsu, Shandong and Hebei. In addition, environmental pressures (emission limits) particularly in

eastern China also discourage the expansion of facilities.

To address these ongoing hurdles, the Chinese textile industry continues to restructure. Industry sources

report that during China’s stockpiling years (2013-2015) many small mills with a capacity of about

20,000 spindles suspended operations or closed as a result of China’s comparatively high domestic

cotton prices. China’s total spinning spindles decreased to 120 million at the end of 2016 compared to

150 million in 2014. In search of lower raw material, labor, and a more favorable investment

environment, other industry leaders have moved their operations to China’s central and western regions

(Henan, Sichuan, Anhui, Jiangxi, Xinjiang and Ningxia Provinces) and to foreign countries (Vietnam

and Cambodia). China’s industry also reported Chinese investment in spinning facilities in the United

States, Vietnam and other southeastern countries. These developments may continue to impact China’s

cotton consumption in the long-term.

Policy

The “Target Price” in Xinjiang will remain fixed for the next 3 years

Based on the Chinese central government’s 2017 policy on rural and agriculture issues, on March 16,

2017, the National Development and Reform Commission (NDRC) announced the “Enhancement

Reform to the Target Price-based Subsidy Policy” for Xinjiang Cotton. The announcement stated that

the subsidy policy will continue for the next 3 years (MY17/18 through MY19/20). The fixed target

price for the subsidy will also remain unchanged from the MY16/17 level of RMB18,600 ($2,735)/ton.

The NDRC also set a yearly ceiling volume that will be entitled to the subsidy for Xinjiang. The

entitled volume is set to be 85 percent of the averaged NSB certified national cotton production from

2012 to 2014. Based on NSB production data during that period, this volume ceiling would be 5.47

MMT per year. It is important to note that in previous years, the subsidy did not include a ceiling

volume and the justification for the base years to calculate this ceiling is unclear. What is clear is that

Xinjiang’s cotton production has never exceeded 5.47 MMT per year (recent average yearly production

16

stands at about 4 MMT). Preliminary speculation is that the high ceiling volume may stimulate greater

cotton area and production for Xinjiang in the next 3 years.

As of the date of this report, there is no official announcement for the fixed subsidy (RMB2,000

($313)/ton) for the other nine cotton-producing provinces. As previously reported, the fixed subsidy

amount provided to these provinces will be equivalent to 60 percent of the subsidy rate distributed to

Xinjiang in any given year, but the maximum fixed amount will not be higher than RMB2,000/ton.

Chart 9 - China Cotton Support Policy Evolution

(RMB/ton; MY11/12 to MY19/20)

Note: MY11/12 to MY13/14 is government purchase floor price;

MY14/15 to MY19/20 is “target price” for Xinjiang only; Source: NDRC

In MY14/15, after three marketing years of state purchases at a minimum price, the government

switched to a target price-based subsidy program with a trial period of three years ending in MY16/17.

The implementation of the target price-based subsidy is expected to remain unchanged from MY16/17.

As is common practice, the central government calculates the total subsidy amount based on the

provincial production and provides the funds to provincial authorities. Provincial officials must then

develop their own plan to distribute the payments in their respective provinces.

Post estimates the total subsidy for Xinjiang in MY16/17 will fall from the estimated RMB25.6 billion

($4.13 billion) during the previous year. This estimate is based on the difference between the set target

price of RMB18,600 ($2,800)/ton and the market price; and the NSB certified Xinjiang’s total

production of 3.59 MMT. While this price difference is not yet officially published it is likely to be

much lower as cotton market prices increased in MY16/17.

MY16/17 subsidies to the others nine provinces will also be lower than the estimated RMB 3.98 billion

($642 million) for MY15/16. This is based on NSB certified MY16/17 production in these provinces of

only 1.65 MMT, significantly lower than the 1.99 MMT in MY15/16.

Total Central Government Cotton Subsidies under the Target Price-based System*

17

MY14/15

(billion)

MY15/16

(billion)

MY16/17(billion)

Xinjiang RMB18.4 ($2.98 ) RMB25.6 ($4.13) NA

Other Cotton Producing

Provinces

RMB 4.97 ($0.81) RMB3.98 ($0.64) RMB3.3 ($0.5)

Total RMB23.32 (3.79) RMB29.58 ($4.8) NA *Based on NSB total estimated production and the designated target price for each year.

The MY16/17 distribution model for subsidy payments in Xinjiang expected to continue

According to industry reports, in MY16/17, the distribution of subsidies in Xinjiang (to none-PCC

farms) continued to be production-oriented. That is, 90 percent of the subsidy paid to farmers is based

on actual production compared to only 40 percent in MY14/15. Comparatively, for cotton farmers in the

four prefectures located in southern Xinjiang, only 10 percent of the total provincial subsidy funds were

used to provide an area-based subsidy. The reason behind this is reportedly to further encourage the

restructure of Xinjiang’s cotton farming. The shift is towards more advantaged lands with higher

yield/productivity while taking into account the interests of the minority groups living in the four

prefectures in southern Xinjiang with lower yields. The Xinjiang PCC subsidy distribution, based on

certified production, remained unchanged in MY16/17 and is expected to carry on in MY17/18.

The estimated MY16/17 subsidy converted to acreage rate is down from the previous year due to a

narrower price gap between market and target prices. An industry source estimated that MY16/17

subsidy rate for Xinjiang (except PCC) is about RMB200/Mu ($452/Ha). This rate is much lower than

last year’s subsidy rate for the four southern Xinjiang Prefectures ranging from RMB500/Mu

($1,210/Ha) to RMB540/Mu ($1,306/Ha). MY16/17 subsidy rate for Xinjiang PCC is about

RMB200/Mu ($452/Ha), over half the estimated RMB540/Mu ($1,306/Ha) in MY15/16.

Subsidies in other provinces appear unchanged in MY16/17

Industry sources indicate that the other nine cotton-producing provinces will receive a direct subsidy of

RMB2,000 ($323)/ton in MY16/17. However, this is not officially confirmed. The central government

appropriated funds to these nine provinces based on their NSB certified production. Each of these

provinces then formulated their own subsidy distribution plan based on the farmers’ area or production.

As of this report, the payment for MY16/17 crop is still unknown but it is likely to be similar to the

previous year.

Changes in China’s Corn Support Policy could lead to more cotton

In 2016, China eliminated its temporary state reserve system for corn. Since then, China replaced this

system with a subsidy mechanism, a fund for risk management, and a fund to award corn growers in

18

major producing provinces. As a result of this policy shift, corn prices have dropped significantly.

Sources indicate that the corn planting area decreased by two million hectares in MY2016/17. In

MY2017/18, the corn area is expected to continue decreasing by an additional 670,000 hectares, or

nearly 6 percent from 2016/17. As corn profits decrease, cotton may become a substitute crop in

provinces in Northern China.

The 2017 sales of state cotton reserves started on March 6, 2017

The 2017 government sale of cotton reserves started on March 6, and will carry on through the end of

August 2017. Similar to 2016, the basic auction price will be more “market–oriented” based on the

average of the domestic and the international spot market cotton price indexes. The daily auction

volume will be about 30,000 tons. The selling price is still based on the average of the domestic and

international cotton price indexes and will be adjusted weekly. Given the limitations on additional

import quotas and the anticipated “reasonable auction price,” some industry sources expect that the total

volume sold is likely to reach 3.7 MMT during the 2017 rotation period. Hence, state cotton stocks may

fall to 5 MMT by the end of 2018.

Seed Subsidy

In MY17/18, the government will continue to provide a long-standing seed subsidy of about $36/Ha for

selected “high quality variety” seeds to improve the cotton quality in all provinces.

Targeted Loans

In MY16/17, the Agriculture Development Bank of China (ADBC) continued to provide targeted loans

with favorable terms for seed cotton purchases. This program facilitated the marketing of seed cotton

when market prices remained weak and demand for cotton was stagnant. Specific data on total loans is

not available but will be slightly higher than the previous year on a relatively larger cotton production.

ADBC will continue to provide financial assistance for the marketing of domestic cotton in MY17/18.

Registration System for Overseas Cotton Suppliers

In order to export cotton China, overseas cotton suppliers must register with China’s General

Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). On January 18, 2013,

AQSIQ published Decree No.151 on "Supervision and Administration Measures for Inspection of

Import Cotton." The Decree took effect on February 1, 2013. Since then, the implementation of these

measures on cotton trade has been limited. Based on these registration requirements, traders are

recommended to register with AQSIQ before exporting cotton to the Chinese market. AQSIQ keeps

updating the supplier list on its website to include newly registered or renewed overseas cotton

suppliers. The latest update was on November 18, 2016. To date, Post has not received any reports of

trade disruptions as result of this registration process.

National Standard on Cotton Baling (GB6975-2013)

19

On December 31, 2013, China’s National Standardization Technical Committee on Cotton Processing

published a National Standard on cotton baling (GB6975-2013) which went into effect on April 2014

(see GAIN translation report). As cotton baling practices differ among world cotton suppliers, full

implementation of China’s revised standards remains impractical. Thus far, U.S. cotton exports have not

faced significant problems related to this standard. However, as overall Chinese imports of cotton

remain under greater scrutiny, a stricter implementation of this standard is likely.

Marketing

China’s MY16/17 seed cotton marketing was 98.5 percent completed by the end of February. This pace

is 1.5 percentage points faster than the previous year. CCA data shows Xinjiang’s MY16/17 total

processed cotton reached 4 MMT by March 1, compared to the CFIB classified volume of 3.94 MMT.

In general, the marketing for processed cotton went smoothly. However, marketing slowed down in

March as the mills control their stocks level in anticipation of the state reserve sales. In MY16/17, the

improved quality of Xinjiang cotton facilitated its marketing. Xinjiang cotton with fiber length of 28

mm or above accounted for 93.5 percent of production in MY16/17, up 18.4 percentage points compared

to MY13/14. In addition, increased cotton use by mills in Xinjiang mildly addressed the usual burden of

having to transport cotton outside the province. Based on CNCE, total cotton shipped out of Xinjiang

during September 1, 2016 to mid February 2017 was 1.75 MMT. Out of the total shipped, 1.05 MMT

were transported by trucks while 704,000 tons were shipped by railcar. The provinces that rank as the

top three recipients of Xingjian cotton are Shandong absorbing 28 percent, Henan with 24 percent, and

Jiangsu with 15 percent.

U.S. cotton exporters interested in exporting cotton to China in need of marketing assistance may

contact USDA/FAS’s Agricultural Trade Offices (ATO) in Beijing, Chengdu, Guangzhou, Shanghai and

Shenyang.

The China International Cotton Conference, a biannual event sponsored by CCA and MOA attracts a

worldwide audience from the cotton/textile industry. The next conference will be held in Chongqing

Municipality in June 2017. CCA, in collaboration with the China National Cotton Exchange also holds

an annual event know as the China Cotton Industry Development Forum. This forum focuses on

analysis and outlook of the market situation.

Tables

Production, Supply and Demand (PSD)

Table 1. PSD (in 1,000 Bales and 1,000 Ha)

Cotton

China

2015/2016 2016/2017 2017/2018

Market Year

Begin:

Market Year

Begin:

Market Year

Begin: Aug 2017

20

Aug 2015 Aug 2016

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Planted 0 3,050 0 3,000 0 3,100

Area Harvested 3,050 3,050 2,850 3,000 0 3,100

Beginning Stocks 66,920 66,920 58,198 58,198 0 49,493

Production 22,000 22,000 22,500 23,195 0 23,654

Imports 4,406 4,406 4,500 4,500 0 4,600

MY Imports from U.S. 0 880 0 1,150 0 1,150

Total Supply 93,326 93,326 85,198 85,893 0 77,747

Exports 128 128 50 150 0 150

Use 35,000 35,000 36,250 36,250 0 36,744

Loss 0 0 0 0 0 0

Total Dom. Cons. 35,000 35,000 36,250 36,250 0 36,744

Ending Stocks 58,198 58,198 48,898 49,493 0 40,853

Total Distribution 93,326 93,326 85,198 85,893 0 77,747

Stock to Use % 166 166 135 136 0 111

Yield 1,570 1,570 1,719 1,683 0 1,661

TS=TD 0 0 0 0 0 0

21

Table 2. PSD (in 1,000 Tons and 1,000 Ha)

Cotton

China

2015/2016 2016/2017 2017/2018

Market Year

Begin:

Aug 2015

Market Year

Begin:

Aug 2016

Market Year

Begin: Aug 2017

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Planted 0 3,050 0 3,000 0 3,100

Area Harvested 3,050 3,050 2,850 3,000 0 3,100

Beginning Stocks 14,570 14,570 12,671 12,671 0 10,776

Production 4,790 4,790 4,899 5,050 0 5,150

Imports 959 959 980 980 0 1,002

MY Imports from U.S. 0 192 0 250 0 250

Total Supply 20,319 20,319 18,550 18,701 0 16,927

Exports 28 28 11 33 0 33

Use 7,620 7,620 7,892 7,892 0 8,000

Loss 0 0 0 0 0 0

Total Dom. Cons. 7,620 7,620 7,892 7,892 0 8,000

Ending Stocks 12,671 12,671 10,646 10,776 0 8,895

Total Distribution 20,319 20,319 18,550 18,701 0 16,927

Stock to Use % 166 166 135 136 0 111

Yield 1,570 1,570 1,719 1,683 0 1,661

TS=TD 0 0 0

22

Trade Tables

Table 3. China’s Monthly Cotton Imports

Unit: Tons

Month 2013 2014 2015 2016 2017

January 457,490 292,485 161,230 95,588 114,924

February 378,842 246,057 159,095 56,231

March 528,822 222,100 127,919 57,903

April 430,878 224,365 160,761 70,004

May 345,779 191,535 163,073 78,778

June 269,793 218,246 161,775 72,750

July 337,799 280,253 105,659 94,855

August 275,885 204,493 70,019 69,533

September 201,270 122,903 50,948 60,644

October 141,185 81,939 42,109 41,334

November 173,122 92,112 84,465 54,972

December 608,606 264,459 188,157 143,551

TOTAL 4,149,471 2,440,947 1,475,210 896,143

Unit: Bales

Month 2013 2014 2015 2016 2017

January 2,101,252 1,343,384 740,529 439,036 527,846

February 1,740,021 1,130,140 730,723 258,269

March 2,428,879 1,020,105 587,532 265,948

April 1,979,023 1,030,508 738,375 321,528

May 1,588,163 879,720 748,994 361,827

June 1,239,159 1,002,404 743,033 334,141

July 1,551,511 1,287,202 485,292 435,669

August 1,267,140 939,236 321,597 319,365

September 924,433 564,493 234,004 278,538

October 648,463 376,346 193,407 189,847

November 795,149 423,070 387,948 252,486

December 2,795,327 1,214,660 864,205 659,330

TOTAL 19,058,520 11,211,270 6,775,640 4,115,985

Source: Global Trade Atlas

23

Table 4. China’s Cotton Imports by Country of Origin

Unit: Tons

Country MY13/14 MY14/15 MY15/16 MY16/17*

Australia 677,112 272,075 268,389 107,459

United States 638,621 153,372 191,680 168,989

Uzbekistan 161,403 107,675 137,415 21,721

India 1,097,372 160,723 120,980 95,226

Brazil 91,395 134,084 116,075

Burkina Faso 79,905 18,588 5,557

Cameroon 55,217 8,811 51,233

Mali 42,214 2,238 2,862

Benin 39,196 6,582 13,918

Mexico 27,462 11,271 14,788

Cote d Ivoire 25,953 3,224 8,283

Zimbabwe 12,516 12,542 2,345

Tanzania 11,266 1,994 0

Others 115,477 33,957 28,281

Total 3,075,109 927,136 961,806 484,958

Price $/ton 2,117 1,840 1,716

* First six month data of MY16/17; Source: Global Trade Atlas

24

Table 5. China’s Monthly Cotton Exports

Unit: Tons

Month 2013 2014 2015 2016 2017

January 70 440 516 200 40

February 0 408 533 574

March 211 440 845 487

April 990 363 150 433

May 715 766 0 557

June 495 296 1,544 446

July 507 258 1,459 1,351

August 348 2,676 12,047 1,197

September 959 4,194 4,293 387

October 1,409 1,633 2,826 239

November 717 1,646 3,549 987

December 313 349 1,153 899

TOTAL 6,734 13,469 28,915 7,757

Unit: 480-lb Bales

Month 2013 2014 2015 2016 2017

January 322 2,021 2,370 919 184

February 0 1,874 2,448 2,636

March 969 2,021 3,881 2,237

April 4,547 1,667 689 1,989

May 3,284 3,518 0 2,558

June 2,274 1,360 7,092 2,048

July 2,329 1,185 6,701 6,205

August 1,598 12,291 55,332 5,498

September 4,405 19,263 19,718 1,777

October 6,472 7,500 12,980 1,098

November 3,293 7,560 16,301 4,533

December 1,438 1,603 5,296 4,129

TOTAL 30,929 61,863 132,807 35,628

Source: Global Trade Atlas

25

Table 6. China’s Monthly Cotton Yarn and Thread Imports

Unit: Tons

Month 2013 2014 2015 2016 2017

January 182,030 180,997 217,843 161,490 174,281

February 102,385 153,398 124,091 115,953

March 199,518 178,145 248,568 190,540

April 164,099 182,080 215,583 164,621

May 171,879 152,393 184,435 170,963

June 145,429 140,619 193,558 159,339

July 198,217 155,906 215,671 163,693

August 203,448 150,303 207,673 170,417

September 201,023 174,074 217,860 153,966

October 182,582 172,794 174,326 140,745

November 176,085 164,263 159,505 178,832

December 172,894 206,439 186,270 201,699

TOTAL 2,099,589 2,011,411 2,345,383 1,972,258

Marketing Year Aug/13-Jul/14 Aug/14-Jul/15 Aug/15- Jul/16 Aug/16- Jul/17

TOTAL 2,079,570 2,267,622 2,072,233

Source: Global Trade Atlas

Table 7. China’s Monthly Cotton Yarn and Thread Exports

Unit: Tons

Month 2013 2014 2015 2016 2017

January 54,976 42,977 37,419 26,183 28,147

February 30,321 33,104 22,913 18,911

March 51,834 42,707 29,445 31,001

April 49,458 44,665 33,292 31,066

May 39,013 39,518 31,396 32,024

June 38,417 36,283 30,874 30,089

July 43,541 35,197 31,168 35,713

August 44,104 33,310 28,116 35,768

September 42,582 34,685 25,847 30,133

October 34,873 26,973 22,739 26,320

November 43,589 26,858 20,394 26,200

December 46,414 31,564 28,460 30,888

TOTAL 519,122 427,841 342,063 354,296

Marketing Year Aug/13-Jul/14 Aug/14-Jul/15 Aug/15-Jul/16

TOTAL 486,013 369,897 330,543

Source: Global Trade Atlas

Table 8. China’s Monthly Cotton Fabric Imports

26

Unit: 1,000 Square Meters

Month 2013 2014 2015 2016 2017

January 53,556 42,962 37,275 25,469 14,869

February 34,273 40,429 25,127 19,124

March 56,104 50,594 50,279 26,885

April 58,792 60,366 45,715 27,881

May 65,729 46,247 37,295 24,641

June 48,106 39,731 40,496 28,651

July 63,187 44,237 41,323 26,311

August 60,578 37,979 34,816 26,136

September 54,386 41,738 36,373 24,871

October 55,296 43,946 34,927 21,013

November 46,965 38,112 34,010 23,537

December 48,480 42,675 36,270 25,105

TOTAL 645,453 529,015 453,904 299,624

Source: Global Trade Atlas

Table 9. China’s Monthly Cotton Fabric Exports

Unit: 1,000 Square Meters

Month 2013 2014 2015 2016 2017

January 690,568 702,301 550,266 643,228 624,364

February 465,717 236,633 463,496 428,582

March 646,411 544,449 349,172 616,650

April 740,500 661,831 559,964 667,348

May 703,833 626,164 601,174 685,033

June 693,315 547,612 516,393 582,197

July 688,002 545,390 559,230 624,459

August 642,518 604,286 591,247 701,082

September 657,223 572,285 633,045 578,439

October 584,706 620,901 674,052 575,869

November 690,257 631,127 580,570 554,328

December 662,751 592,102 617,955 551,292

TOTAL 7,865,802 6,885,080 6,696,564 7,208,507

Source: Global Trade Atlas

Other Tables

27

Table 10. Cotton Planted Area and Production by Province

Planted Area (in 1,000 Ha)

Year MY14/15 MY15/16 MY16/17 MY17/18

Xinjiang 2,258 1,950 1,970 2,030

Shandong 593 450 220

Hebei 400 320 140

Hubei 345 220 198

Henan 140 100 50

Anhui 180 100 104

Jiangsu 88 80 70

Hunan 130 80 90

Gansu 40 30 28

Other 151 70 130

Total 4,325 3,400 3,000 3,100

Production (in 1,000 tons)

Year MY14/15 MY15/16 MY16/17 MY17/18

Xinjiang 4,250 3,600 3,950 4,000

Shandong 632 460 260

Hebei 420 300 144

Hubei 360 250 220

Henan 133 100 60

Anhui 178 150 88

Jiangsu 110 100 66

Hunan 129 100 80

Gansu 76 45 56

Other 212 95 126

Total 6,500 5,200 5,050 5,150

Average Yield (Kg/Ha) 1,503 1,529 1,683 1,661

Note: FAS/Beijing estimate and forecast

28

Table 11. Cotton Tariffs as of January 1, 2017 (continued)

Description HS Code M.F.N.(%) Gen(%) VAT ED Unit

Cotton, not carded or combed 5201-0000 Kg

Cotton, not carded or combed, including

degreased cotton -in quota

5201-

0000.01

1 125 13 13

Cotton, not carded or combed, including

degreased cotton - out of quota, interim

5201-

0000.80

40(*) 0 13 13

Cotton, not carded or combed, including

degreased cotton -out of quota

5201-

0000.90

40 125 13 13

Cotton waste, yarn waste 5202-1000 10 30 17 13 Kg

Cotton waste, garnetted stock 5202-9100 10 30 17 13 Kg

Cotton waste, other 5202-9900 10 30 17 13 Kg

Cotton, carded or combed 5203-0000 125 17 13 Kg

Cotton, carded or combed, in quota 5203-

0000.01

1 125 17 13

Cotton, carded or combed, out of quota 5203-

0000.90

40 125 17 13

Cotton sewing thread, containing 5204-1100 5 40 17 16 Kg

85% or more by weight of cotton

Other 5204-1900 5 40 17 16 Kg

Put up for retail sale 5204-2000 5 50 17 16 Kg

Cotton yarn (other than sewing 5205-1100 5 40 17 16 Kg

thread), containing 85% or more to

by weight of cotton, not for retail sale 5205-4800

Cotton yarn (other than sewing thread)

containing less than 85% by weight of

cotton, not put for retail sale

5206-1100

to 5206-

4500

5 40 17 16 Kg

Cotton yarn (other than sewing 5207-1000 6 50 17 16 Kg

thread), containing 85% or more 5207-9000 6 50 17 16 Kg

Note: (*) subject to sliding tariff rate based on a formula; VAT--Value Added Tax; ED--Export

Drawback Rate; Source: PRC Customs Import & Export Tariff, 2016

Table 11. Cotton Tariffs as of January 1, 2016 (continued)

Description HS Code M.F.N.(%) Gen(%) VAT ED Unit

29

Woven fabrics of cotton, 5208-

1100

10 70 17 16 M/Kg

containing 85% or more by weight of

cotton, weighing not more than 200

g/square meter

to

"

Woven fabrics of cotton, containing 85%

or more by

weight of cotton, weighing more

than 200 g/square meter

"

"

5208-

5990*

*Except:

5208-

2300

12 70 17 16 M/Kg

5209-

1100

10 70 17 16 M/Kg

5209-1200 10 70 17 16 M/Kg

5209-1900 10 70 17 16 M/Kg

5209-2100 12 70 17 16 M/Kg

5209-2200 12 70 17 16 M/Kg

5209-2900 12 70 17 16 M/Kg

5209-3100 10 70 17 16 M/Kg

5209-3200 10 70 17 16 M/Kg

5209-3900 10 70 17 16 M/Kg

5209-4100 10 70 17 16 M/Kg

5209-4200 10 70 17 16 M/Kg

5209-4300 10 70 17 16 M/Kg

5209-5900 10 70 17 16 M/Kg

Note: VAT--Value Added Tax; ED--Export Drawback Rate;

Source: PRC Customs Import & Export Tariff, 2017

30

Table 12. Tariff Rate Quota

Description HS Code Initial Quota and

Tariff Rate

Final Quota and

Tariff Rate

Implementation of Final

Quota

Cotton 780,750 MT 894,000 MT 2004

5201 -

0000

1% 1%

5203 -

0000

1% 1%

Other terms and conditions:

1) STE share = 33% (See Note)

2) Staging of TRQ for cotton:

Year TRQ quantity:

2002 - 818,500 MT

2003 - 856,250 MT

2004 - 894,000 MT

2005 - 894,000 MT (China added 1.4 MMT TRQ in 2005)

2006 - 894,000 MT (China added 2.7 MMT TRQ in 2006, subject to variable import duty)

2007 - 894,000 MT (China added 2.6 MMT TRQ in 2007, subject to variable import duty)

2008 - 894,000 MT (China added 2.6 MMT TRQ in 2008, subject to variable import duty)

2009 - 894,000 MT (China added 400,000 MT TRQ only for processing trade, due to weak demands for

cotton)

2010 - 894,000 MT (China added 2.67 MMT TRQ subject to variable import duty)

2011 - 894,000 MT (China added 2.7 MMT of TRQ subject to variable import duty)

2012 - 894,000 tons (China added 2.4 million tons of TRQ subject to variable import duty)

2013 - 894,000 tons (China added an estimated 2.3 million tons additional TRQ subject to variable duty

or for processing trade)

2014 - 894,000 tons 2014 - 894,000 tons (China added about 1.3 million tons additional TRQ subject to

variable duty were distributed but not officially announced)

2015 – 894,000 tons distributed (Industry sources estimated about 300,000 tons of cotton were imported

by China’s bonded zones* and destined for processing-trade for re-export in 2015)

2016 – 894,000 tons distributed

2017 -- 894,000 tons distributed

*Cotton imports by China’s bonded zones are included in China’s total cotton import data. However,

industry sources explained that these imports are not subject to TRQ control if the processed products

are proven to be exported.

Note: China’s WTO commitment does NOT mandate a TRQ for CY05 and after, but China maintained

an identical quantity of TRQ as CY04. In addition to those volumes, China adds TRQs based on market

demand. The added TRQs are subject to a variable import duty.

Source: NDRC and industry estimates

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